Among the following, which source yields the maximum tax revenue for Indian State Governments?

Introduction / Context:
This question is related to the revenue structure of Indian State Governments. It asks which source of tax revenue contributes the most to state finances. Understanding which taxes form the bulk of state level income is important for exams that cover federal finance, fiscal policy, and the Indian economy.

Given Data / Assumptions:

• We are considering major tax sources for State Governments.
• Options include excise duties, commercial taxes, land revenue, customs revenue, and stamp and registration fees.
• The question refers to the traditional pattern before full implementation of new systems like GST.

Concept / Approach:
Historically, States in India derived a large part of their tax revenue from sales tax or value added tax on goods. These taxes are often grouped under the term commercial taxes. While States also earn from state excise on items like alcohol, land revenue, and stamp duties, the largest single category of own tax revenue has been sales tax or VAT. Customs revenue is a central tax and is not a major source of direct income to States.

Step-by-Step Solution:
Step 1: Eliminate customs revenue because it is mainly collected by the Union Government.Step 2: Recognise that land revenue has declined in importance over time and is now a very small part of state income.Step 3: State excise duties are significant but generally smaller than total commercial taxes.Step 4: Stamp and registration fees are important for property transactions but still fall short of sales tax or VAT.Step 5: Conclude that commercial taxes, that is, sales tax or VAT, provide the maximum tax revenue to State Governments.

Verification / Alternative Check:
You can check this by reviewing any state budget, where commercial taxes normally occupy the first position among tax heads on the revenue side. Even after the introduction of VAT and later GST, earlier exam questions often relied on this fact. This cross check confirms that commercial taxes are the main own tax revenue source for States.

Why Other Options Are Wrong:
Excise duties at the state level are mainly on alcohol and certain goods and are important but not the largest category. Land revenue has steadily declined due to policy changes and limited revenue potential. Customs revenue is a central tax, and only a portion may be shared with States indirectly. Stamp and registration fees, while sizeable in some states, typically come after commercial taxes in magnitude, so they cannot be the maximum source on an all India basis.

Common Pitfalls:
Students often confuse central excise with state excise and overestimate its role in state finances. Another mistake is to assume that land revenue is still the main source, which was true historically but no longer holds. To avoid confusion, remember that pre GST, commercial taxes like sales tax and VAT were the primary engines of state tax revenue.

Final Answer:
The source that yields the maximum tax revenue for Indian State Governments is commercial taxes (sales tax or VAT).